FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For Quarter Ended: JUNE 30, 2000
Commission File Number: 0-14786
AUTOINFO, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2867481
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification number)
incorporation or organization)
P.O. Box 4383, Stamford, CT 06907-0383
--------------------------------------------------------------------------------
(Address of principal executive office)
(203) 595-0005
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES |X| NO |_|
Number of shares outstanding of the registrant's common stock as of August
11, 2000 7,756,953 shares of common stock, $.01 par value.
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Item 1. Financial Statements: Page
Balance Sheets -
June 30, 2000 (unaudited) and December 31, 1999.............. 3
Statements of Discontinued Operations (unaudited)-
Three and Six months ended June 30, 2000 and 1999............ 4
Statements of Cash Flows from Discontinued Operations
(unaudited)-Three and Six months ended June 30,
2000 and 1999................................................ 5
Notes to Unaudited Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 11
Part II. Other Information ................................................ 16
Signatures ................................................................ 17
2
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
BALANCE SHEETS
June 30, December 31,
2000 1999
--------- ------------
Unaudited Audited
ASSETS
Cash $ 390,936 $ 584,949
Short-term investments 389,692 399,000
Other assets 12,924 16,520
------------ ------------
$ 793,552 $ 1,000,469
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities subject to compromise (See Note 3)
Subordinated notes and other debt $ 9,393,572 $ 9,393,572
Accounts payable and accrued liabilities 1,782,559 1,265,159
------------ ------------
Total liabilities 11,176,131 10,658,731
------------ ------------
Stockholders' Equity
Common stock - authorized 20,000,000 shares
$.01 par value; issued and outstanding -
7,756,953 shares as of June 30, 2000 and
December 31, 1999 77,570 77,570
Additional paid-in capital 17,772,431 17,772,431
Deferred compensation under stock bonus plan (264,284) (271,889)
Retained deficit (27,968,296) (27,236,374)
------------ ------------
Total stockholders' equity (10,382,579) (9,658,262)
------------ ------------
$ 793,552 $ 1,000,469
============ ============
See notes to condensed unaudited financial statements
3
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment income $ 32,446 $ 50,192 $ 14,109 $ 14,690
----------- ----------- ----------- -----------
Costs and expenses:
Interest expense 467,400 484,561 233,700 238,073
Operating expenses 242,568 567,029 119,521 317,663
Reorganization expenses 91,777 -- 20,850 --
Depreciation & amortization -- 19,266 -- --
Loss on disposition of securities 2,116 -- 2,116 --
Net unrealized holding gain (39,493) -- (39,493) --
----------- ----------- ----------- -----------
Total operating expenses 764,368 1,070,856 336,694 555,736
----------- ----------- ----------- -----------
Net loss $ (731,922) $(1,020,664) $ (322,585) $ (541,046)
=========== =========== =========== ===========
Basic and diluted net loss per
share: ($ .09) ($ .13) ($ .04) ($ .07)
=========== =========== =========== ===========
Weighted average number of
common and common
equivalent shares 7,756,953 7,756,953 7,756,953 7,756,953
----------- ----------- ----------- -----------
</TABLE>
See notes to condensed unaudited financial statements
4
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FROM DISCONTINUED OPERATIONS
(Unaudited)
Six Months Ended
June 30,
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss $ (731,922) $(1,020,664)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization -- 19,266
Amortization of deferred compensation 7,605 7,604
Loss on disposition of securities 2,116
Net unrealized holding gain (39,493)
Changes in assets and liabilities:
Other assets 3,596 316,550
Accounts payable and accrued liabilities 517,400 66,140
----------- -----------
Net cash used in operating activities (240,698) (611,104)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of short-term investments 46,685 1,184,756
----------- -----------
Net cash provided by investing activities 46,685 1,184,756
----------- -----------
Cash flows from financing activities:
Decrease in borrowings, net -- (638,002)
----------- -----------
Net cash used in financing activities -- (638,002)
----------- -----------
Net decrease in cash (194,013) (64,350)
Cash at beginning of period 584,949 116,570
----------- -----------
Cash at end of period $ 390,936 $ 52,220
=========== ===========
See notes to condensed unaudited financial statements
5
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Forward Looking Statements
Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking statements"(within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The forward-looking statements included herein are
based on current expectations that involve numerous risks and uncertainties. Our
plans and objectives are based, in part, on assumptions involving judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Although we believe that our assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein
particularly in view of the current state of our operations, the inclusion of
such information should not be regarded as a statement by us or any other person
that our objectives and plans will be achieved. Factors that could cause actual
results to differ materially from those expressed or implied by forward-looking
statements include, but are not limited to, the uncertainties relating to the
proposed merger with Sunteck Transport Co., Inc., final confirmation of the
Company's Reorganization Plan and the factors set forth in "Certain Factors That
May Affect Future Growth," under Part I, Item 1, of the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 as filed with the Securities
and Exchange Commission.
Note 1. - Business and Summary of Significant Accounting Policies
Business
During 1998, AutoInfo, Inc. (the "Company") ceased to operate as an
automobile finance company. On January 29, 1999, the Company's wholly-owned
subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7
of the United States Bankruptcy Code.
During 1999, the Company negotiated the termination of its lease in
Montvale, New Jersey and relocated to temporary space in Stamford, Connecticut
as part of its continuing effort to reduce operating expenses and preserve
corporate capital. The Company's main business focus became the challenge to
seek out business opportunities in furtherance of its plan to rebuild and create
shareholder value. These efforts were inhibited by a negative net worth and
remaining subordinated debt of $9.3 million. Therefore, the Company commenced
discussions with its noteholders regarding the restructuring of this debt to
enhance the possibility of consummating a transaction to return to an operating
status and create shareholder value.
On February 2, 2000, the Company filed a disclosure statement and
reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the
United States Bankruptcy Code. The Plan provides for the issuance of one share
of its common stock and a cash payment of $ 0.03 for each dollar of
approximately $9.5 million of unsecured debt. At the time of filing, the
requisite number and dollar amount of the unsecured creditor group had voted to
support the Plan. Preliminary hearings were held to consider compliance with the
disclosure requirements. On August 1, 2000, the Company received the conditional
confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly,
the Plan will become effective without further action by the Court upon the
closing of AutoInfo's merger with Sunteck
6
<PAGE>
Transport Co., Inc. ("Sunteck"). Such closing is subject to the fulfillment (or
waiver by Sunteck) of certain conditions, including AutoInfo's obligation to
secure a commitment for $2 million in debt or equity financing prior to closing.
There is no assurance that the Company's merger transaction with Sunteck will be
consummated or that the Plan will receive final confirmation. All documents on
file in our bankruptcy proceeding, case no. 00-10368, can be viewed on the
Bankruptcy Court's Internet site at: http://ecf.nysb.uscourts.gov/index.html
On June 22, 2000, the Company entered into a Merger Agreement with Sunteck
Transport Co., Inc., a full service third party transportation logistics
provider. Pursuant to the Merger Agreement, at closing, Sunteck will merge into
a wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of
AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the
transaction is contingent upon, among other things, the securing of a firm
commitment on or before October 20, 2000, for a financing resulting in gross
proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are
intended for the development and implementation of- Ubidfreight.com - an
e-commerce business-to-business application which will provide an interactive
freight auction matching available freight (shippers) and available cargo space
(truckers and other carriers). The proceeds will be used to complete site
development, fund start-up expenses, commence marketing and provide for
administrative costs. The transition of Sunteck's existing customer and common
carriers relationships as well as its industry experience and expertise will be
key elements in the development and success of the Ubidfreight.com business.
Ubidfreight.com will offer an e-commerce real time freight auction market place
- where shippers will offer their freight for bid directly to carriers/truckers
for transport. This live interactive environment will benefit shippers and
carriers by reducing the cost of handling their freight through the competitive
auction process. Ubidfreight.com's e-commerce site will eliminate the expensive
intermediaries and the inefficiencies inherent in today's transportation
industry. Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its services include ground transportation
coast to coast, local pick up and delivery, warehousing, air freight and ocean
freight. Sunteck has developed strategic alliances with Less than Truckload
(LTL), truckload, air, rail and ocean common carriers to service its customers'
needs. Sunteck's personnel have in excess of forty years of freight industry
experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon
the consummation of the merger, become Chairman of the Board, CEO and President
of AutoInfo.
Assuming the consummation of the merger with Sunteck on or before October
20, 2000, and without giving effect to any further financing , the Company
anticipates having cash and short-term investments of approximately $400,000 and
no debt.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The foregoing factors raise
substantial doubt about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern. Accordingly, the carrying amounts of our assets and liabilities
do not purport to represent realizable or settlement amounts. The Company has
discontinued its operations. Therefore, the accompanying financial statements
present the results of operations of the Company as the Statement of
Discontinued Operations. The ongoing expenses of the Company consists of the
salary and related expenses of its sole remaining employee, Mr. Wunderlich,
President and administrative expenses.
Summary of Significant Accounting Policies
Basis of Presentation
The financial statements of the Company have been prepared using the
accrual basis of accounting under generally accepted accounting principles
("GAAP"). The accounting policies of the Company conform with GAAP.
Principles of Consolidation
7
<PAGE>
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
Short-term Investments
Short-term investments, consisting of marketable securities as of June 30,
2000 and December 31, 1999, are carried at market value. Gains and losses on
disposition of securities are recognized on the specific identification method
in the period in which they occur. Unrealized holding gains and losses on
trading securities based upon the fair market value as of the balance sheet
date, if material, would be included in earnings in the period in which they
occur. Losses on dispositions of securities amounted to $2,116 for the six and
three month periods ended June 30, 2000. Unrealized holding gains amounted to
$39,493 for the six and three month periods ended June 30, 2000. There were no
losses on dispositions of securities or unrealized holding losses for the six
and three month periods ended June 30, 1999.
Fixed Assets
Fixed assets are carried at cost less accumulated depreciation.
Depreciation of fixed assets is provided on the straight-line method over the
estimated useful lives of the related assets which range from three to five
years. As of December 31, 1998, fixed assets consisted predominantly of
furniture, fixtures and equipment at the Company's Montvale, New Jersey
headquarters facility. During the quarter ended June 30, 1999, the Company
terminated its lease and vacated the premises. Accordingly, the remaining fixed
assets were written-off.
Loss Per Share
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
prior periods have been restated to conform to the new requirements.
Basic loss per share is based on net loss divided by the weighted average
number of common shares outstanding. Common stock equivalents outstanding were
antidilutive for the three month periods ended June 30, 2000 and 1999.
Use of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets, liabilities and contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the periods
presented. The Company believes that all such assumptions are reasonable and
that all estimates are adequate, however, actual results could differ from those
estimates.
Income Taxes
The Company utilizes the asset and liability method for accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
8
<PAGE>
As of June 30, 2000, the Company has a net operating loss carryforward of
approximately $27 million for federal income tax purposes which expires in 2014.
Any benefit from the utilization of these net operating loss carryforwards has
been fully reserved for in the accompanying financial statements.
Note 2 - General
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments consisting
of normal recurring accruals considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
2000 and 1999 are not necessarily indicative of the results that may be expected
for a full fiscal year. For further information, refer to the financial
statement and footnotes thereto included in the Company's report on Form 10-K
for the year ended December 31, 1999.
Note 3 - Liquidity and capital resources and filing pursuant to Chapter 11 of
the United States Bankruptcy Code
The Company has outstanding $9.3 million of notes due in 2007 and 2008,
comprised of $8.2 million of 12% notes, included with the liabilities assumed
with the acquisition of FALK Finance Company, Inc. ("FFC") in December 1995,
plus accrued interest of $1.1 million through December 31, 1998. Interest on
these notes is due quarterly at the option of the Company at the rate of 10% if
paid in cash and 12% if paid in common shares of the Company. Interest on the
notes from January 1, 1999 through June 30, 2000 has been accrued but not paid.
Representatives of these note holders designated three members of the Company's
Board of Directors, one of whom subsequently resigned.
The Company's liquid assets amounted to approximately $ 781,000 as of June
30, 2000.
On February 2, 2000, the Company filed a disclosure statement and
reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the
United States Bankruptcy Code. The Plan provides for the issuance of one share
of its common stock and a cash payment of $ 0.03 for each dollar of
approximately $9.5 million of unsecured debt. At the time of filing, the
requisite number and dollar amount of the unsecured creditor group had voted to
support the Plan. Preliminary hearings were held to consider compliance with the
disclosure requirements. On August 1, 2000, the Company received the conditional
confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly,
the Plan will become effective without further action by the Court upon the
closing of AutoInfo's merger with Sunteck Transport Co., Inc. ("Sunteck"). Such
closing is subject to the fulfillment (or waiver by Sunteck) of certain
conditions, including AutoInfo's obligation to secure a commitment for $2
million in debt or equity financing prior to closing. There is no assurance that
the Company's merger transaction with Sunteck will be consummated or that the
Plan will receive final confirmation.
On June 22, 2000, the Company entered into a Merger Agreement with Sunteck
Transport, Inc., a full service third party transportation logistics provider.
Pursuant to the Merger Agreement, at closing, Sunteck will merge into a
wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of
AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the
transaction is contingent upon, among other things, the securing of a firm
commitment on or before October 20, 2000, for a financing resulting in gross
proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are
intended for the development and implementation of- Ubidfreight.com - an
e-commerce business-to-business application which will provide an interactive
freight auction matching available freight (shippers) and available cargo space
(truckers and other carriers). The proceeds will be used to complete site
development, fund start-up expenses, commence marketing and provide for
administrative costs. The transition of Sunteck's existing customer and common
carriers relationships as well as its industry experience and expertise will be
key elements in the development and success of the Ubidfreight.com business.
Ubidfreight.com will offer an e-commerce real
9
<PAGE>
time freight auction market place - where shippers will offer their freight for
bid directly to carriers/truckers for transport. This live interactive
environment will benefit shippers and carriers by reducing the cost of handling
their freight through the competitive auction process. Ubidfreight.com's
e-commerce site will eliminate the expensive intermediaries and the
inefficiencies inherent in today's transportation industry. Sunteck, which was
formed in 1997, is a full service third party transportation logistics provider.
Its services include ground transportation coast to coast, local pick up and
delivery, warehousing, air freight and ocean freight. Sunteck has developed
strategic alliances with Less than Truckload (LTL), truckload, air, rail and
ocean common carriers to service its customers' needs. Sunteck's personnel have
in excess of forty years of freight industry experience. Harry Wachtel,
Sunteck's President and sole shareholder, will, upon the consummation of the
merger, become Chairman of the Board, CEO and President of AutoInfo.
Pursuant to the Plan, the 7,756,953 shares of the Company's Common Stock
outstanding at the time of filing will be deemed New Common Shares,
approximately 9.5 million additional New Common Shares will be issued to the
unsecured creditor class and 10,000,000 shares will be issued in consummation of
the merger with Sunteck. Upon confirmation as currently contemplated, the
Company will have approximately 27.3 million shares of Common Stock outstanding.
Assuming the consummation of the merger with Sunteck, substantially all of
the liabilities of the Company as of June 30, 2000 are subject to compromise.
The following pro-forma balance sheet as of June 30, 2000 gives effect to the
adjustments resulting from the assumed confirmation of the Plan:
<TABLE>
<CAPTION>
Reorganization Sunteck Merger
As Stated Adjustments Adjustments As Adjusted
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total assets $ 794,000 $ (285,000) $ 300,000 $ 809,000
------------ ------------ ------------ ------------
Liabilities $ 11,176,000 $(10,944,000) $ 300,000 $ 532,000
Equity (10,382,000) 10,659,000 -- 277,000
------------ ------------ ------------ ------------
Total liabilities and equity $ 794,000 $ (285,000) $ 300 000 $ 809,000
------------ ------------ ------------ ------------
</TABLE>
If the merger is not consummated and the Plan is not confirmed, and the
Company is unsuccessful in identifying and consummating another transaction in
furtherance of its plan to rebuild the Company and create shareholder value, the
Company does not have sufficient liquid assets and available lines of credit to
meet its short and long-term capital requirements.
Note 4 - Debt Settlement
On March 23, 1999, the Company paid $585,000 representing full payment,
net of a $25,000 discount, of principal and accrued interest on a note which had
been previously declared in default by the lender.
10
<PAGE>
AUTOINFO, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition And Results of Operations
General
In December 1995, we acquired the operating assets of Falk Finance Company
("FFC"), a Norfolk, Virginia based specialty financial services company for
$5,125,000 in cash and the assumption of liabilities and debt approximating
$34,000,000. As a result, we became a specialized consumer finance company that
acquired and serviced automobile receivables from automobile dealers selling new
and used vehicles to non-prime customers. In July 1996, we commenced operations
of our northeast regional center in Norwalk, Connecticut to provide a complete
range of services to dealers in the Northeast.
During 1997 and 1998, several non-prime automobile finance companies,
including the Company, experienced poor loan performance, higher delinquency
rates and increased credit losses on their portfolio assets. In addition, during
this period, a number of non-prime automobile finance companies made strategic
decisions to exit the market-place. This trend was the direct result of several
factors including: (a) the impact of increased levels of competition on loan
acquisition discounts; (b) the heightened demand created by the increased supply
of capital and used automobile inventories; (c) the need to attract consumers
with lower credit qualifications to meet this additional demand; (d) economic
uncertainties and financial difficulties within the non-prime automobile
industry as well as management upheavals at certain industry leaders; and (e)
the increased levels of outstanding consumer debt and personal bankruptcies.
These factors contributed to a significant reduction in available warehouse
lines of credit and a material decline in financial markets investments into the
non-prime automobile industry through the sale of equity securities,
subordinated debt instruments and securitized notes.
We experienced material operating losses during 1996, 1997 and 1998. As a
result of these losses, the adverse changes in the non-prime automobile finance
industry and the deterioration in the our financial condition, we determined to
discontinue the operation of our non-prime automotive finance business.
As a result of these factors, we were unable to maintain adequate levels
of net worth to satisfy the loan covenant requirement under our warehouse
facility agreement and similar covenants pursuant to securitized notes issued in
October 1996. As of December 31, 1997, our warehouse lender was no longer
funding the acquisition of non-prime automobile receivables we generated.
Accordingly among other actions, we restructured operations and significantly
reduced overhead and successfully completed the sale of approximately $58
million of automobile receivables and repaid $47 million under our warehouse
line. Additionally, in conjunction with a July 1998 sale of approximately $8
million of automobile receivables which collateralized our securitized notes,
the remaining balance outstanding on these notes of approximately $7 million was
paid in full.
During the fourth quarter of 1997, we closed our northeast regional center
in Norwalk, Connecticut.
During the fourth quarter of 1998, we sold all remaining repossessed
vehicles, closed our Norfolk, Virginia operating facility, further reduced
overhead and completed the restructuring of outstanding debt under our warehouse
facility and with our subordinated note holders. After the sale of all of our
automobile receivables, we owed the warehouse lender approximately $4.5 million
which agreed to a reduction of $2.25 million and we paid the remaining balance
of approximately $2.3 million in cash. We also granted the warehouse lender a
five year warrant to purchase 1,357,467 common shares at $ .03 per share.
Further, the holders of our $8.2 million of 12% subordinated notes, due in 1999
and 2000, exchanged such notes for new notes totaling approximately $9.35
million due in 2007 and 2008 (the
11
<PAGE>
"New Notes"). The New Notes include the capitalization of interest of
approximately $1.15 million through December 31, 1998 to principal. Interest on
these new notes is due quarterly at our option at the rate of 10% if paid in
cash and 12% if paid in our common shares. In addition, representatives of these
note holders have designated three members of our board of directors, one of
whom subsequently resigned.
On January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc.
("CLC"), filed a voluntary petition under Chapter 7 of the United States
Bankruptcy Code. CLC's carrying amount in the December 31, 1998 consolidated
financial statements has been written off in 1999 as a result of the bankruptcy
filing.
During 1999, we continued to reduce operating overhead by negotiating the
termination of its lease in Montvale, New Jersey and vacating the premises.
On February 2, 2000, the Company filed a disclosure statement and
reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the
United States Bankruptcy Code. The Plan provides for the issuance of one share
of its common stock and a cash payment of $ 0.03 for each dollar of
approximately $9.5 million of unsecured debt. At the time of filing, the
requisite number and dollar amount of the unsecured creditor group had voted to
support the Plan. Preliminary hearings were held to consider compliance with the
disclosure requirements. On August 1, 2000, the Company received the conditional
confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly,
the Plan will become effective without further action by the Court upon the
closing of AutoInfo's merger with Sunteck Transport Co., Inc. ("Sunteck"). Such
closing is subject to the fulfillment (or waiver by Sunteck) of certain
conditions, including AutoInfo's obligation to secure a commitment for $2
million in debt or equity financing prior to closing. There is no assurance that
the Company's merger transaction with Sunteck will be consummated or that the
Plan will receive final confirmation.
On June 22, 2000, the Company entered into a Merger Agreement with Sunteck
Transport, Inc., a full service third party transportation logistics provider.
Pursuant to the Merger Agreement, at closing, Sunteck will merge into a
wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of
AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the
transaction is contingent upon, among other things, the securing of a firm
commitment on or before October 20, 2000, for a financing resulting in gross
proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are
intended for the development and implementation of- Ubidfreight.com - an
e-commerce business-to-business application which will provide an interactive
freight auction matching available freight (shippers) and available cargo space
(truckers and other carriers). The proceeds will be used to complete site
development, fund start-up expenses, commence marketing and provide for
administrative costs. The transition of Sunteck's existing customer and common
carriers relationships as well as its industry experience and expertise will be
key elements in the development and success of the Ubidfreight.com business.
Ubidfreight.com will offer an e-commerce real time freight auction market place
- where shippers will offer their freight for bid directly to carriers/truckers
for transport. This live interactive environment will benefit shippers and
carriers by reducing the cost of handling their freight through the competitive
auction process. Ubidfreight.com's e-commerce site will eliminate the expensive
intermediaries and the inefficiencies inherent in today's transportation
industry. Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its services include ground transportation
coast to coast, local pick up and delivery, warehousing, air freight and ocean
freight. Sunteck has developed strategic alliances with Less than Truckload
(LTL), truckload, air, rail and ocean common carriers to service its customers'
needs. Sunteck's personnel have in excess of forty years of freight industry
experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon
the consummation of the merger, become Chairman of the Board, CEO and President
of AutoInfo.
The foregoing factors raise substantial doubt about our ability to
continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments that might be necessary should we be unable to
continue as a going concern. Accordingly, the carrying amounts of our assets and
liabilities do not purport to represent realizable or settlement amounts.
12
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Results of Operations
Three and Six Months Ended June 30, 2000 and 1999
Revenues
Revenues for the six month periods ended June 30, 2000 and 1999 of $28,000
and $50,000, respectively, consisted of interest and dividends on short-term
investments. The decline is directly related to the decrease in short-term
investments. Revenues for the three month periods ended June 30, 2000 and 1999
of $10,000 and $15,000, respectively, consisted of interest and dividends on
short-term investments. The decline is directly related to the decrease in
short-term investments.
Costs and Expenses
Interest expense for the six and three month periods ended June 30, 2000
($467,000 and $234,000, respectively) and 1999 ($485,000 and $238,000,
respectively) was related to subordinated debt and other bank debt. The decrease
is directly related to the repayment of debt during the three month period ended
June 30, 1999.
Operating expenses for the six and three months ended June 30, 2000
($243,000 and $120,000, respectively) and 1999 ($567,000 and $318,000,
respectively) consisted primarily of corporate overhead. The decrease is
directly related to reduction in corporate staff and the cost reduction plan
implemented by the Company.
Reorganization expenses for the six and three month period ended June 30,
2000 of $71,000 consists of legal and other costs related to the February 2,
2000 filing pursuant to Chapter 11 of the United States Bankruptcy Code.
Depreciation and amortization expense for the three months ended June 30,
1999 of $19,000 consisted of the depreciation of fixed assets.
Loss on disposition of securities of $2,000 for the six and three month
period ended June 30, 2000 represents the loss on disposition of securities
recognized on the specific identification method in the period in which they
occur.
Unrealized holding gain of $40,000 for the six and three month period
ended June 30, 2000 represents the reduction of unrealized losses on trading
securities based upon the fair market value as of the balance sheet date.
Loss from Operations
Loss from operations for the six month period ended June 30, 2000 was
($736,000) compared with ($1,021,000) in the prior year period. Loss from
operations for the three month period ended June 30, 2000 was ($327,000)
compared with ($541,000) in the prior year period. The decrease is primarily the
result of the reduction in operating expenses. There is no income tax benefit
for the six and three month periods ended June 30, 2000 and 1999 as the Company
has recorded the utilization of its available income tax carrybacks as of
December 31, 1997.
Liquidity and Capital Resources
Trends and Uncertainties
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During 1998, we ceased to operate as an automobile finance company. On
January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a
voluntary petition under Chapter 7 of the United States Bankruptcy Code.
During 1999, we negotiated the termination of our lease in Montvale, New
Jersey and relocated to temporary space in Stamford, Connecticut as part of our
continuing effort to reduce operating expenses and preserve corporate capital.
Our main business focus became the challenge to seek out business opportunities
in furtherance of our plan to rebuild the company and create shareholder value.
These efforts were inhibited by the negative net worth and remaining
subordinated debt of $9.3 million. Therefore, we commenced discussions with our
noteholders regarding the restructuring of this debt to enhance the possibility
of consummating a transaction to return us to an operating status and create
value.
On February 2, 2000, the Company filed a disclosure statement and
reorganization plan (the "Plan") pursuant to Chapter 11 of Title 11 of the
United States Bankruptcy Code. The Plan provides for the issuance of one share
of its common stock and a cash payment of $ 0.03 for each dollar of
approximately $9.5 million of unsecured debt. At the time of filing, the
requisite number and dollar amount of the unsecured creditor group had voted to
support the Plan. Preliminary hearings were held to consider compliance with the
disclosure requirements. On August 1, 2000, the Company received the conditional
confirmation of the Plan, as amended, from the Bankruptcy Court. Accordingly,
the Plan will become effective without further action by the Court upon the
closing of AutoInfo's merger with Sunteck Transport Co., Inc. ("Sunteck"). Such
closing is subject to the fulfillment (or waiver by Sunteck) of certain
conditions, including AutoInfo's obligation to secure a commitment for $2
million in debt or equity financing prior to closing. There is no assurance that
the Company's merger transaction with Sunteck will be consummated or that the
Plan will receive final confirmation.
On June 22, 2000, the Company entered into a Merger Agreement with Sunteck
Transport, Inc., a full service third party transportation logistics provider.
Pursuant to the Merger Agreement, at closing, Sunteck will merge into a
wholly-owned subsidiary of AutoInfo in exchange for 10 million shares of
AutoInfo Common Stock (the "Sunteck Merger"). The consummation of the
transaction is contingent upon, among other things, the securing of a firm
commitment on or before October 20, 2000, for a financing resulting in gross
proceeds to AutoInfo of at least $2.0 million. The proceeds of the financing are
intended for the development and implementation of- Ubidfreight.com - an
e-commerce business-to-business application which will provide an interactive
freight auction matching available freight (shippers) and available cargo space
(truckers and other carriers). The proceeds will be used to complete site
development, fund start-up expenses, commence marketing and provide for
administrative costs. The transition of Sunteck's existing customer and common
carriers relationships as well as its industry experience and expertise will be
key elements in the development and success of the Ubidfreight.com business.
Ubidfreight.com will offer an e-commerce real time freight auction market place
- where shippers will offer their freight for bid directly to carriers/truckers
for transport. This live interactive environment will benefit shippers and
carriers by reducing the cost of handling their freight through the competitive
auction process. Ubidfreight.com's e-commerce site will eliminate the expensive
intermediaries and the inefficiencies inherent in today's transportation
industry. Sunteck, which was formed in 1997, is a full service third party
transportation logistics provider. Its services include ground transportation
coast to coast, local pick up and delivery, warehousing, air freight and ocean
freight. Sunteck has developed strategic alliances with Less than Truckload
(LTL), truckload, air, rail and ocean common carriers to service its customers'
needs. Sunteck's personnel have in excess of forty years of freight industry
experience. Harry Wachtel, Sunteck's President and sole shareholder, will, upon
the consummation of the merger, become Chairman of the Board, CEO and President
of AutoInfo.
The foregoing factors raise substantial doubt about our ability to
continue as a going concern.
Liquidity and Capital Resources
At June 30, 2000, we had outstanding $9.3 million of subordinated debt.
The Company's cash and short-term investments amounted to approximately
$781,000 as of June 30, 2000.
14
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The total amount of debt outstanding as of June 30, 2000 and December 31,
1999 was $9.4 million. This following table presents the Company's debt
instruments and weighted average interest rates on such instruments as of June
30, 2000 and December 31, 1999:
Weighted
Average
Balance Rate
----------------------------
Subordinated debt $9.3 12.0%
Other debt $ .1 8.5%
Inflation and changing prices had no material impact on revenues or the
results of operations for the period ended June 30, 2000.
15
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AUTOINFO, INC. AND SUBSIDIARIES
Part II - OTHER INFORMATION
Item 1 - 3: Inapplicable
Item 4: Submission of Matters to a Vote of Security Holders: None
Item 5: Inapplicable
Item 6 (a): None
Item 6 (b): During the quarter ending March 31, 2000, the Company filed a
report on Form 8-K pursuant to Item 4 thereof reporting the
retention of independent auditors.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
authorized.
AUTOINFO, INC.
(Registrant)
-----------------------------------------
/s/ William I. Wunderlich
-----------------------------------------
William I. Wunderlich
President and Principal Financial Officer
Date: August 11, 2000
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